The UK’s burgeoning demand for artificial intelligence (AI) data centres may soon come at the cost of new housing developments, as proposed government measures could prioritise these energy-intensive facilities over essential homes. With the electricity grid facing unprecedented strain, experts caution that the prioritisation of AI infrastructure could effectively halt new residential projects, exacerbating the ongoing housing crisis.
Surge in Electricity Demand
Recent figures reveal that there are currently around 140 data centres waiting for connections to the electricity grid across the UK. The first half of 2025 alone saw a staggering 460% increase in this queue, predominantly due to the escalating energy requirements of data centres. This unprecedented demand means that many other infrastructure projects, including hospitals and industrial sites, are now facing lengthy delays as they await their turn for electricity access.
Under new government proposals tabled on Wednesday, projects promising significant economic growth and job creation could potentially bypass this queue. However, the Home Builders Federation (HBF) has issued a stark warning: neglecting to prioritise housing developments in favour of data centres could create an effective “moratorium” on building new homes.
Regulatory Challenges for Housing
The energy regulator, Ofgem, has previously highlighted the alarming surge in the electricity connection queue, stating that it had surpassed even the most optimistic projections for future demand. Many of the projects currently waiting for connection are only “speculative,” lacking adequate financing, planning permissions, or land rights to progress into actual developments. This situation poses a real risk of sidelining legitimate projects capable of generating jobs and stimulating local economies.
In light of these challenges, the government plans to consult on allowing “strategically important” projects—such as AI infrastructure, electric vehicle charging hubs, and industrial sites transitioning from fossil fuels—to receive priority access to the grid. Meanwhile, Ofgem is considering tightening regulations concerning entry into the queue, aiming to streamline the process.
AI Minister Kanishka Narayan expressed optimism about the proposed reforms, stating, “Delivering data centres relies on access to the grid. These timely reforms will help us move at pace, to seize AI’s potential to help build a wealthier and fairer Britain.”
Housing Crisis Intensifies
Despite the government’s focus on economic development, the HBF has voiced urgent concerns regarding the lack of prioritisation for new housing. Steve Turner, the executive director of HBF, remarked, “As we continue to face a housing crisis, it is frustrating that regulatory, planning, and policy arrangements effectively prioritise energy intensive data centres over energy efficient homes for families.”
Data centres, classified as critical national infrastructure, already enjoy preferential treatment in planning processes, often circumventing local objections. Turner warns that if housing isn’t afforded similar priority, it could lead to an effective freeze on new home construction in regions where electricity capacity is already constrained.
Concerns are particularly pronounced in London, where some housing projects in west London have faced delays as the electricity grid has reached its capacity. The London Assembly’s Planning and Regeneration committee has indicated that the reality of these constraints is already impacting new housing developments in the capital.
The Future of Data Centres
Currently, nearly 500 data centres operate across the UK, facilitating a wide array of digital services—from banking to online gaming—and collectively account for about 2% of the nation’s electricity consumption. However, the rapid expansion of AI technologies is expected to substantially increase the demand for data centres. According to the grid operator, the electricity consumption of these facilities could rise by as much as six-fold by 2050.
Why it Matters
The potential prioritisation of data centres over housing developments underscores a pressing dilemma for the UK: how to balance the urgent demands of the digital economy with the equally pressing need for affordable housing. As the government seeks to foster economic growth through AI, it must also address the implications of these decisions on the housing crisis. Failure to do so risks deepening inequalities and leaving many families without the homes they desperately need. The choices made today will shape the landscape of the UK for generations to come.
